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Never, Ever Trust What the IRS Says

That's our friend Paul Krugman talking about us, presumably, and the sources we use to show there is actually a great deal of income mobility, both up and down the economic ladder. For instance, the table below, from this report based on IRS data, shows that about 60 percent of households that were in the lowest income quintile in 1999 were in a higher quintile in 2007. About 40 percent of households in the top quintile moved to a lower quintile over this 9 year period.

Yes, the biggest chunk moved to the next quintile over, but about 1/3rd of those in the lowest quintile moved to the middle quintile or higher. About 6 percent moved all the way from the lowest to the highest quintile!

Based on the same data, the first graph below shows that millionaires don't stick around too long - about half for just one year. It seems Steve Martin was on to something, although income fluctuations appear to be driven more by capital gains than crazy inventions.

Lastly, based on another set of IRS data, the second graph below shows that it is even less likely that one can remain among the top 400 income earners. Over the period 1992 to 2008, about 73 percent make the list for just one year. Only 4 remain among the top 400 for all 17 years.

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The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.

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